February 23, 2012 | 5:38 PM

The Ohio Department of Education has rejected four applications from Akron-based charter school company White Hat Management to open new charter schools under the department’s sponsorship. The department said the way White Hat wanted to set up schools would have given the private company too much control over the new schools’ boards.

“ODE has rarely challenged large, not to mention politically well-connected, operators. It appears, however, that the department has committed itself to quality and performance. Its rejection of the White Hat applications appears to be based on merit – they simply weren’t very good applications and lacked basic clarity on matters of separation of authority between the operator and the schools’ governing authorities.”

At the same time, the Department of Education approved White Hat’s requests to sponsor two other new charter schools – but only after White Hat agreed to changes in how much authority the company had over the schools.

Those changes bring the way the schools’ boards are set up more in line with what some charter school sponsors say are the best way to do things.

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Even for the schools that were approved, the department said it appeared the school structures White Hat proposed would give the company authority over “significant aspects” of the school’s operations, aspects like personnel and academic decisions. A recent court ruling (in a suit that other White Hat schools brought against the company) said those functions should instead belong to the school’s board, Office of School Sponsorship Director Mark Michael said in a letter to White Hat.

The power-sharing dynamic between the board and the charter-school operator is one of the issues in the ongoing lawsuit that several White Hat schools brought against the company.

Michael said the department could require White Hat to make other changes in its contract to operate the new charter schools, depending on the outcome of the lawsuit.

White Hat can appeal the department’s decision in court. The company did not respond today to calls and emails.

The two new schools the Ohio Department of Education did approve are a K-8 school in Akron and a dropout recovery school (a program that serves students who have dropped out of other high schools) in Warrensville Heights.

Charter-school sponsors are nonprofit organizations or other groups (like school districts) in charge of making sure charter schools do what they should – educate kids, follow the laws and spend taxpayer dollars responsibly. In return, sponsors get up to 3 percent of a school’s state funding.

“So directors who owe their position and continued appointment to White Hat, are voting a lucrative operator contract to White Hat. Since a community school is a public entity, ODE feels this is not permissible…”

Mark Michael, Ohio Department of Education

Until about ten years ago, the Ohio Department of Education was the state’s largest charter-school sponsors. But legislators forced the department to hand off sponsorship duties to nonprofits and other groups after a state audit found that Ohio charter schools failed at twice the national rate and noted millions of dollars in overpayments to schools.

Last year, White Hat successfully lobbied lawmakers to let the department sponsor charter schools again. The 2011 state budget allows the Ohio Department of Education to sponsor up to five new charter schools a year for the next four years. (It also lets the department sponsor up to 15 existing charter schools each year.)

Originally, White Hat wanted to set up all of these new charter schools the same way:

Each charter school would be a nonprofit corporation governed by a White Hat-affiliated company plus at least five directors. The White Hat-affiliated company would have the power to appoint and remove the directors at any time and for any reason, and could reappoint the directors – or not – at the end of each one-year term. Those are the same directors who would be voting to hire – or not hire – White Hat to operate the school.

That’s different from how most other Ohio charter schools operate. Usually, Ohio charter schools are overseen only by a five-member board.

White Hat’s proposed structure was a problem, the Ohio Department of Education’s Mark Michael wrote in an email:

“So directors who owe their position and continued appointment to White Hat, are voting a lucrative operator contract to White Hat. Since a community school is a public entity, ODE feels this is not permissible when the PBC (public benefit corporation) is also a public entity (community school).”

The problem with the set-up White Hat proposed is that the “ultimate authority” to make decisions about the charter school’s operations wouldn’t actually lie with the school’s governing board, said Dave Cash, chair of the Ohio Association of Charter School Authorizers and president of Charter School Specialists, one of Ohio’s largest charter school sponsors:

“There would be someone else that would decide whether the board was acting in the best interests of the board.”

White Hat agreed to change how two of its proposed schools were set up to satisfy the department. For the other four proposed schools, White Hat agreed to make smaller changes, but those weren’t enough to satisfy the department that the charter schools’ boards would be independent from White Hat.

It’s unclear why White Hat agreed to make bigger changes in some proposed schools than others.

The Department of Education asked White Hat to make other changes in the schools the company proposed, including complying with state laws about how many boards a charter-school board member can serve on and complying with public records and open meetings laws. The department also asked White Hat for more information about the schools’ financial forecasts and methods to account for state money.

But the department did not require significant changes in the new schools’ academic plans.

For example, the K-8 school that White Hat wants to open would be similar to the Hope Academy charter schools that White Hat already operates. The majority of those schools that have been open for several years received D’s or F’s on their state report cards last year. None was rated higher than a C.

The Department of Education’s Mark Michael told us that earlier this year that state law doesn’t allow the department to evaluate an operator or school model’s past performance when deciding whether to sponsor a charter school.

But it should, William Haft of the National Association of Charter School Authorizers told us earlier this year:

He said you’d want to “have a really good reason” to agree to sponsor a new school based on a model with that a record like those of White Hat’s K-8 schools.

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StateImpact Ohio is a collaboration among WCPN, WKSU and WOSU. Reporters Amy Hansen and Mark Urycki travel the state to report on the state of education in Ohio, where it’s heading, and how it affects you. Read their reports on this site and listen to them on public radio stations across Ohio.